A week or so ago we wrote:
Turning to short-term “trading positions,” our models targeted the late-July trading top in the S&P 500 at ~3020. Subsequently, they called the “selling climax” low of August 5th at ~2822 that we said was THE low. That low was retested three time and was never violated. We further wrote the SPX is likely to trade out to new all-time highs. The jury is still out on that call, but after three attempts to do so the senior index is probably going to have to regroup before new highs can be achieved. Moreover, the D-J Industrial Average has rallied eight sessions in a row and history shows that markets rarely go more than 10 consecutive session in any one direction. So, we will say it again, “The senior index is probably going to have to regroup before new highs can be achieved.” Longer-term, however, we remain in a secular bull market that has years left to run.
Since writing that the S&P 500 has done exactly that; regrouped, bobbing between ~3020 and ~2978 while rebuilding its internal energy. Of course, such “trading nuances” have nothing to do with secular bull markets.
Speaking to the secular bull market, after nearly 49 years in this business, we have seen a number of cycles and developed a long-term perspective. We have often spoken about the difference between a “secular bull market” and what many consider to be a bull market because it is up 20%+. The reciprocal is that a 20%+ decline represents a bear market. While those may be “tactical” bull and bear markets, they are certainly NOT secular bull markets. Secular bull markets tend to last 15+ years. Are there declines within a secular bull market? You bet! But even the number of ~30% declines in the 1949-1966 or 1982-2000 secular bull markets (including the 1987 Crash) did not deter the secular bull market. It is much like the story of Mr. Partridge (Old Turkey) in Edwin LeFevre’s book Reminiscences of a Stock Operator. Because he was such a shrewd investor, folks would come up to Old Turkey and ask what they should do in the markets. He would cock his head to one side and say, “It’s a bull market you know!”
That has been our mantra since most stocks bottomed in October 2008. Have we raised cash from time to time? Yep. Have we rebalanced portfolios? Yes. Have we hedged to the downside on occasion? Sure. However, it has always been within the construct of, “It’s a secular bull market you know!” With the indices at, or approaching, new all-time highs, we thought it would be a good idea to repost one of our letters about secular bull markets and how smart/wealthy investors operate in them. In said report, we published a letter from our friend Richard Russell (Dow Theory Letters) titled "Rich Man, Poor Man." I like this story: